September 30, 2022

U.S. Inflation Data Presents Another Test For Bitcoin This Week

2 min read


With crypto markets already under pressure from Russia-Ukraine tensions, upcoming inflation information from the United States today is set to include another layer of uncertainty. The Personal Consumption Expenditures Index (PCE) for January is due this Friday. What makes the data so important, and potentially market-moving, is that it is the preferred inflation gauge of the Federal Reserve.

With belief suggesting “severe fear,” a strong inflation reading could even more unsettle markets already hammered by simmering Russia-Ukraine tensions.

Rising inflation also creates more area for the Fed to raise rate of interest, which will minimize liquidity in markets and damage investment into risk-driven properties like stocks, and more just recently, crypto.

Crypto moving in line with stock exchange

As institutional interest in cryptos grew through 2021, the market has traded more in line with stocks- specifically technology stocks. For instance, Bitcoin is down about 18% this year, compared to a near 16% decline in the tech-heavy Nasdaq index.

On Feb. 10, a stronger-than-expected U.S. customer rate reading saw crypto market capitalization depression by almost $80 billion in thirty minutes. The marketplace then doubled its losses over the next 2 days.

Crypto's reaction to U.S. inflation

The current volatility has actually also cost crypto, particularly Bitcoin, its status as a potential hedge against inflation. The token has likewise lagged gold by a large margin this year.

Inflation dangers this week?

The PCE index is anticipated to grow by 6% in January- its fastest increase in about 40 years, Yahoo finance reported, citing data from Bloomberg. An in-line, and even stronger-than expected reading is likely to rattle markets.

The crypto market has actually already lost more than $100 billion this month on jitters over Russia. While it might be revealing early indications of a healing now, it is still susceptible to any additional shocks.

Twitter user @Trader4Lyf kept in mind–

– I remain bearish of conventional markets, and the “risk off” sentiment in that space will likewise impact #Crypto

Tech stocks for instance look bad But like March 2020’s small crash we decoupled in a few weeks, and so I can still be bullish for this year

The post U.S. Inflation Data Presents Another Test For Bitcoin This Week appeared first on CoinGape.